Privé contractors hope to keep construction costs suit in Nevada

By Steve Green

Wednesday, Dec. 9, 2009 | 2:11 p.m.

Contractors seeking $1.37 million for work on the Privé nightclub in Las Vegas hope Privé’s bankruptcy doesn’t interfere with their efforts to get paid.

The contractors have asked Privé’s bankruptcy judge in Miami for permission to continue litigating in Nevada a lawsuit over construction costs for the club at Planet Hollywood Resort on the Las Vegas Strip.

Sun City Electric and Midwest Drywall Co. filed papers in Miami's bankruptcy court last month and this month, also asking that the state lawsuit trial set for Jan. 4 not be affected by the bankruptcy filing.

Privé’s attorneys, however, want the construction cost lawsuit to be transferred to Miami’s bankruptcy court. The bankruptcy case was filed there because that’s where Privé’s parent company is based.

Other parties in the state lawsuit over tenant improvements to the club, contracted for in 2008, are Planet Hollywood operator OpBiz LLC and Privé general contractor ADT Construction Group Inc.

Prive Vegas LLC, which includes the Living Room club; and sister company PVPH LLC, filed for bankruptcy protection Nov. 11 and listed as "disputed" debts of $843,000 owed to Sun City Electric for a mechanic's lien foreclosure claim and $527,000 owed to Midwest Drywall.

Other disputed claims are from OpBiz ($690,0000) and ADT Construction ($1.6 million).

"The Jan. 4 trial will liquidate (the claims) and determine the classification of Sun City (and Midwest Drywall) as either a secured or unsecured creditor of Prive, as well as to determine the amount of Sun City's claims against Prive and other non-debtor parties," Sun City said in its motion.

But attorneys for Prive argued the disputes over payment of construction costs can be handled by the bankruptcy court – and that resolution of the case in bankruptcy court will ensure the lien disputes don’t de-stabilize Privé’s larger bankruptcy reorganization efforts.

"Either Sun City is owed money by debtors or it is not. Either Sun City is entitled to a lien on debtors’ leasehold interest or it is not," Prive attorneys argued in court papers. "Nevada law is not so different than any other jurisdiction that the Nevada state court holds any sort of specialized knowledge or expertise. This court, as does other bankruptcy courts, is often called upon to resolve issues of payment disputes on construction contracts, and the application of various states’ lien laws.’’

Bankruptcy Judge A. Jay Cristol has not yet ruled on the motion to allow the Nevada trial to proceed.

Privé attorneys said in their filing that the club, which remains open, is cash-flow positive.

They said it was driven into bankruptcy by legal fees over the construction cost lawsuit as well as expenses associated with an investigation by Clark County officials this year over allegations of illegal activity at the club.

As related by court filings in Privé’s bankruptcy case, Privé paid ADT "significant funds on this project which were misapplied and may not have made their way to subcontractors, including Sun City Electric.’’

ADT later filed for bankruptcy reorganization and its case was eventually converted to a Chapter 7 liquidation.

With Sun City seeking in the state lawsuit to foreclose on Privé and Planet Hollywood’s interest in Privé, Privé said in court papers: "Allowing Sun City Electric to proceed to trial on its lien in Nevada state court would be expensive and disruptive to this reorganization and could have devastating effects on administration on this case by impacting upon the lease obligations between debtor and its landlord.’’